Stop the Presses! Federal Trade Commission Does Not Support Taxes on Broadcasters and Others to Help “Reinvent” Newspapers After All?

By Paul A. Cicelski

Paul A. Cicelski

Earlier this week, FTC Chairman Jon Leibowitz began the FTC’s final workshop concerning the future of media “How Will Journalism Survive the Internet Age?” by dismissing as a ” non-starter” any chance that his agency would recommend new taxes to support or “save” journalism. In advance of this workshop, the FTC staff had prepared and released a discussion document entitled “Potential Policy Recommendations to Support the Reinvention of Journalism.” One of the goals of the document is to try and save the current newspaper business model by, in part, imposing substantial new taxes on other media, including broadcasters. While the FTC says that the term “journalism” used throughout the document does not mean that that the FTC favors newspapers over broadcasters or other media, a close reading of the draft indicates that newspapers would be the primary beneficiary of the FTC proposals should they be adopted.
Shortly after the release of the document, the FTC issued a statement to the effect that the draft did not reflect a formal intention on the part of the FTC to seek new taxes and that the paper was for discussion purposes only. However, in order to fund the proposals, including those to provide potentially billions of dollars in subsidies and various tax breaks and credits to newspapers, the document proposes that the government institute:

• A 7 percent tax on broadcast spectrum to raise $3 to $6 billion while at the same time relieving broadcasters of their obligation to air “public-interest programming.”

• A spectrum auction tax “on the auction sales prices for commercial communication spectrum, with the proceeds going to the public-media fund.”

• A 2 percent sales tax on advertising to generate approximately $5 to $6 billion annually” and to change “the tax write-off of all advertising as a business expense in a single year to a write-off over a 5-year period [to] generate an additional $2 billion per year.”

• A 3 percent Internet Service Provider-cell phone tax requiring consumers to pay a tax on their “monthly ISP-cell phone bills to fund content they access on their digital services” to raise $6 billion annually for the FTC’s proposals.

While the FTC’s look to the future of news gathering might be noble, the proposals to raise taxes on broadcasters, consumer electronics, Internet Service Provider customers, and others would undoubtedly increase costs for consumers and businesses alike, not to mention they raise a host of First Amendment and Constitutional questions regarding politicization and governmental interference with a supposedly impartial press.
In the real world, most newspaper publishers recognize that innovation and new business models are the best ways to survive and thrive going forward as opposed to having the government impose harsh taxes on other media in the “robbing Peter to pay Paul” manner envisioned by much of the FTC report. According to press reports, John Sturm, President and CEO of the Newspaper Association of America commented on the FTC report by stating that “We’ve never sought or asked for anything like a bailout” and Rupert Murdoch is on record warning against the FTC proposals and the “heavy hand” of governmental regulation.

Chairman Leibowitz stated that the FTC’s workshops “have always been more about the future of journalism than saving the past.” While the Chairman might be right, the staff report circulating at the FTC would suggest otherwise as many of its proposals are clearly backward looking. Given the stakes and dollar amounts involved, broadcasters, consumer electronics manufacturers, Internet Service Providers as well as consumers should pay close attention to this proceeding as it continues to unfold at the FTC. The FTC plans to issue its final report on the future of media sometime this Fall.